The environmental impact of economic growth highlights the need to replace conventional fuel with a green energy source to avoid climate catastrophe. Global leaders have agreed to substitute fossil fuels with green hydrogen, which will be the most feasible source of green energy by 2050. Sweden, for instance, has already begun work in heavy industries such as iron and steel. This has sparked a global rush to produce green hydrogen, with countries like Australia, China, Japan and the European Union leading the production.

Green hydrogen is produced by splitting water into hydrogen and oxygen using renewable energy and technology called an electrolyser. Nepal is in a favourable situation for the production of hydrogen due to the abundance of renewable energy in the form of hydropower. According to reports from public and private entities, Nepal will have at least 10,000 megawatts of hydropower by 2030, with a demand of approximately 7,000 megawatts. The total capacity is expected to be 39,000 megawatts by 2040. Thus, surplus hydropower could be channelled to produce green hydrogen at a competitive price. It is anticipated that the cost of producing green hydrogen will be below $1 per kg by 2050.

Besides utilising surplus resources, using green hydrogen as a primary source of fuel will allow Nepal to change its narrative of economic development, as the commercial application of the green hydrogen potential cover various sectors like the chemical industry, transportation, energy-intensive industries (iron and steel), and residential sector. However, infrastructural and technological constraints need attention before introducing green hydrogen in the respective sectors. Nepal may not be able to introduce green hydrogen in every mentioned sector immediately, so it requires careful examination of early adoption of green hydrogen.

This brings the discussion of using green hydrogen in the chemical industry to produce ammonium-based fertilisers, including urea. As the shortage of chemical fertiliser in Nepal has become a chronic issue with the demand surging three times the supply, the country should focus on producing chemical fertiliser as a derivative of green hydrogen in the near term. For example, with the surplus hydropower of 3,000 megawatts, approximately 2,150,000 tons of green urea can be produced. Nepal imported 180,000 tons of ammonium-based chemical fertiliser in fiscal 2021-22, 60 percent accounting for urea. Therefore, the immediate application of green hydrogen in the chemical industry will initiate the much-awaited domestic production of chemical fertiliser, simultaneously reducing the fiscal burden on the government of Nepal. In 2021, the government allocated Rs15 billion for its fertiliser subsidy programme.

In addition, the application of green hydrogen to produce chemical fertiliser also has a socio-economic significance. The agriculture sector contributes approximately 25 percent of the gross domestic product and supports the livelihood of 68 percent of the population. In this regard, the timely availability of adequate fertiliser would not only ensure the increment in productivity and income of the farmers but also address the pivotal issues of food security, which stands at 22 percent of the population.

Using green hydrogen in the iron and steel industry is another potential medium-term application. The technology of hydrogen-based steel production is commercially available but it requires investment in specific infrastructure like replacing the orthodox method of blast furnace with a direct reduced iron process and use of molten oxide electrolysis to produce molten iron directly.

In the long term, as the technology and infrastructure mature, Nepal can also consider using green hydrogen in the transportation sector. Currently, hydrogen-based fuel cell vehicle (FCEV) is still evolving, with a market size of approximately $1 billion; however, it is expected to grow to $6 billion by 2030. Studies suggest that FCEV could be a dominant player (especially in heavy vehicles like trucks and ships) by 2035, but its operation requires special infrastructural support, like hydrogen refuelling stations and production and supply of hydrogen fuel.

The residential use of green hydrogen, especially for heating and cooking, is also a long-term prospect. The required technology is still in the initial stage, as only a handful of demonstration projects examining hydrogen as a potential fuel for domestic application are in operation globally. In this context, Nepal can use green hydrogen as a source of fuel for domestic applications based on global technological advancement. Besides technological constraints, the current infrastructure, like residential buildings, will not support the hydrogen application due to safety concerns as hydrogen is a highly flammable fuel.

Green hydrogen as a source of fuel is expected to be a reality soon and to explore the benefits, Nepal must draft a roadmap highlighting its potential application in the near term, medium term and long term. Also, the focus should be on assembling the required infrastructure.